The first week of February, a practice manager we work with laid eleven envelopes on her desk. Each one held a Form 1099 from a payer: Aetna, two Blue Cross plans, Cigna, UnitedHealthcare, the state Medicaid managed care plans and a workers' compensation carrier. Her plan was the same as every year: scan them, email them to the accountant, move on. This year she asked us a question first. "Why does the Aetna form say $412,380 when my system says we posted $398,210 from Aetna last year?"
That $14,170 question is the whole point of payer 1099 reconciliation. A 1099 is the payer telling the IRS how much it paid your tax ID during the calendar year. Your practice management system is your record of what you posted. When the two disagree, one of three things is true: timing, an accounting difference, or money that left the payer and never reached your bank. The third one is the one we care about, and the only time of year a payer hands you a clean total to check against is right now.
Glossary line, since many physicians reading this have never opened one: a Form 1099-MISC is the IRS information return a business files when it pays another business $600 or more in a year. For medical practices the number that matters sits in Box 6, "Medical and health care payments." Payers must furnish these forms to recipients by January 31, which is why they arrive the first week of February.
Key takeaways
- The 1099 total is the payer's count of what it paid your tax ID; the variance against your posted payments is a short list of explainable items or a sign of missing money.
- Timing differences (December checks posted in January) explain most of the gap and should be proven, not assumed.
- Recoupments, virtual card payments and payments to an old tax ID or address are the usual places real money hides.
- Do the reconciliation in February while reissue windows are still open; a stale check from March of last year is hard to recover by summer.
- This is an operations exercise, not tax advice; the accountant still files, but the billing office should read the forms first.
What a payer 1099 actually counts
Payers report on a cash basis by payment date. If a check was cut on December 29 and your office posted it on January 6, the payer counts it in the old year and you counted it in the new one. That single behavior explains the largest share of every variance we have ever worked. It also means the reconciliation is against the calendar year of payment, not date of service, and not the month you posted.
What the payer includes varies. Most report gross payments issued: paper checks, electronic funds transfers and, increasingly, virtual credit card payments processed through a third-party vendor. Some payers net recoupments (money they took back by reducing a later remit) out of the total; others report gross and ignore the offsets. Interest payments on late claims are sometimes included and sometimes reported separately. Refunds you sent back to the payer are never subtracted, because the payer reports what it paid, not what it kept.
The form is issued to a tax identification number, not to an NPI or a location. If your practice bills under one group TIN, you get one form per payer. If a physician still has a payer contract under a personal TIN from before joining the group, that physician gets a separate form, and the payments on it may never have been posted to the group system at all. Every February we find at least one of these.
How to run the payer 1099 reconciliation
Start in the practice management system, not on the form. Run a payments report by payer for the full prior calendar year, filtered by deposit date or check date rather than posting date if your system allows it. Include all payment types: check, EFT, virtual card and any manual adjustments coded as payments. Exclude patient payments and exclude contractual adjustments; the 1099 has nothing to do with either.
Then build a simple sheet with one row per payer: 1099 amount, posted amount, difference. Sort by the size of the difference. Anything under a small tolerance, say $250, is not worth an afternoon. Everything above it gets a line-by-line explanation. Here is the manager's Aetna row worked through:
| Item | Amount | Where it was found |
|---|---|---|
| 1099-MISC Box 6 total | $412,380 | Form from payer |
| Posted payments, calendar year | $398,210 | PM payments-by-payer report |
| Difference to explain | $14,170 | |
| December checks posted in January | $9,800 | January deposit log, check dates 12/22 to 12/30 |
| Recoupment netted on a March remit | $3,120 | ERA showing PLB segment, forward balance |
| Check issued in August, never received | $1,250 | Payer portal payment history |
| Remaining unexplained | $0 |
Two of those three items are bookkeeping. The third is $1,250 that Aetna says it paid and the practice never saw. The payer portal showed a check mailed in August to a suite number the practice left two years ago. A stop-payment and reissue request took one phone call. Multiply that pattern across eleven payers and the reconciliation usually pays for itself before lunch.
The five places the money hides
After enough of these, the variance items fall into a small number of buckets. The first is the address or TIN problem above. Payers update their remittance address from the enrollment file, not from your letterhead, so a practice that moved and never filed the change with each payer will keep receiving 1099s for checks it never saw. Cross-check every payer's pay-to address in the portal against your current one.
The second is virtual credit card payments. Several payers now pay by default through a card vendor unless you opt out in writing. The card payment shows up as a fax or email with a 16-digit number, someone has to key it into a terminal, and the processor takes a percentage. If nobody keyed it, the payer counts it as paid and you have nothing posted. The 1099 catches these because the payer's total includes the card payment at face value.
The third is recoupments and forward balances. When a payer takes money back on a remit, the ERA carries it in a PLB (provider level adjustment) segment. Some posting staff post the net deposit and never record the recoupment against the original claim, so the payments report understates what the payer sent. The fix is a posting rule: always post gross payment and record the recoupment as its own transaction.
The fourth is unapplied cash. Deposits that were entered against the payer but never matched to a claim still count as posted payments in most systems, so they don't create a 1099 variance. But if your staff parked a confusing deposit in a suspense account instead, it may be missing from the payer report entirely. Pull the suspense account for the year and assign each item.
The fifth is the split practice: a provider paid under a personal TIN, a satellite location enrolled separately, or a payer contract that was never moved to the group after an acquisition. These show up as a 1099 addressed to a name or number you don't recognize, and they mean claims are being paid somewhere your system isn't looking. Our RCM audit work starts with exactly this list because it is the fastest way to find revenue that never reached the practice.
What to do with the results
Document every reconciled row, even the ones that were only timing. Next year's reconciliation begins with this year's December-to-January carryover, so keep the list of late checks. If a payer's 1099 is materially wrong, meaning it reports payments you can prove you never received and cannot recover, ask the payer for a corrected form; your accountant will want it, and counsel or your tax preparer should weigh in on anything that affects a filing. We are describing an operations check, not giving tax advice, and the boundary matters.
Then fix the causes. File remittance address updates with every payer whose form went somewhere strange. Opt out of virtual card payments in writing if the fees don't make sense for you, or build a same-day keying step if you keep them. Rewrite the posting procedure so recoupments are always recorded gross. And add one line to the month-end close: compare each payer's deposits in the bank statement to the payments posted, every month, so next February's reconciliation is boring.
Questions we hear
A payer's 1099 is lower than what we posted. Is that a problem?
Usually not. The common causes are January checks from the prior year that you posted in this year, interest payments the payer reports separately, or payments from an affiliate the payer reports under a different entity name. Confirm the timing and move on. A 1099 higher than your posted total is the one to chase.
We received a 1099 from a company we have never heard of.
Look at the address and the amount, then search your deposits for matching totals. It is often the virtual card vendor or a payment integrator working for a payer you know, and the amounts will match a set of card payments. If nothing matches, call the number on the form; you may have a payer contract active under an old entity that is still paying somewhere.
Do Medicare and Medicaid send 1099s?
Medicare Administrative Contractors issue 1099 forms for Part B payments, and state Medicaid agencies and their managed care plans generally do as well. Treat them like any other payer in the reconciliation. The Medicare form is a useful check on your remit posting, since the MAC's payment history in the portal is complete and easy to pull.
What to do this week
- Collect every 1099 the practice received and list them by payer, TIN and amount on one sheet.
- Run the payments-by-payer report for the prior calendar year by check or deposit date, excluding patient payments.
- Explain every difference above your tolerance, item by item, starting with the December carryover.
- For any check the payer says it issued and you cannot find, request a stop-payment and reissue through the portal or provider line.
- Verify the pay-to address and virtual card election on file with each payer, and correct them.
- Hand the annotated sheet, not just the forms, to your accountant.
